Analysis of insured customer deposits across multiple geographies initiated in the wake of bank runs across developed economies reveal US's top 10 banks' deposits are insured in the range of 38.4-66 per cent, according to a research titled, Ecowrap, of the State Bank of India's Economic Research Department.
Another interesting trend that has been observed in the US is that top banks' deposits, on average, have been insured to the tune of around 50-55 per cent.
The research also said Indian banks were the epitome of resilience. Foreign claims on India are USD 104.2 billion on an immediate counterparty basis, and USD 81.5 billion on a guarantor basis.
Immediate counterparty basis means the methodology whereby positions are allocated to the primary party to a contract whereas guarantor basis meant the methodology whereby positions are allocated to a third party that has contracted to assume the debts or obligations of the primary party if that party fails to perform. According to World Bank, foreign claims are defined as the sum of cross-border claims plus foreign offices' local claims in all currencies.
When compared with other major countries, India has the least foreign claims, both as a counterparty basis, and also as a guarantor basis, the report said.
"Further, our ratio of foreign claims to domestic claims is also least among countries signifying that our banking and financial system is very disciplined and no international balance sheet contagion can start from India. Maturity wise also, International claims on India are the least among major countries,"
The report said the recent rise in the policy rate of 50 bps by the European Central Bank (
The research added, however, if history had any rear-view mirror, the quantum of unsynchronised rate decisions by the ECB in the last 25 years pre-and post -the global financial crisis (GFC) is looking grossly mistimed.
Soumya Kanti Ghosh said, "We feel the fissures of the present shock, after a year of war and three years of the pandemic, may prove to be quite a costly affair for the health of beleaguered European banking system going forward even as ECB continues branding Euro area banking sector as resilient, with strong capital and liquidity positions, as on September 2022, not factoring the rise in borrowing costs and the resultant decline in demand, along with tighter credit standards, all leading to a vortex."
The research also said separately, that short-term borrowing like uninsured deposits by First Republic Bank, of USD 30 billion from a suite of 11 different US-based banks, for an ultra-short-term period of 90 days, is shortsighted if we compare such packages in India in 2008 and 2020 when the consortium of banks or champion banks handheld the ailing banks for a multiyear period.
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